Blue-chip firms are top of the charts

Companies that offer opportunities and a healthy work-life balance attract quality staff, writes Olive Keogh

DOTCOM and IT firms have lost the glow that made them irresistible to employees.

The thrill of watching share options soar has turned to dread as prices have plunged. When a list of top places to work is drawn up, a handful of stars from the tech boom years still shine. These days, however, it is the long-established blue chips that have the most allure.

In management consultancy, PA Consulting, Boston Consulting, McKinsey, Watson Wyatt Partners, PricewaterhouseCoopers and KPMG are considered good places to work.

In financial services, Bank of Ireland and AIB rate, as do familiar international names such as Allianz, JP Morgan and Merrill Lynch. Other nominees for gold stars are General Electric, Riverdeep, Microsoft, Hewlett-Packard, CRH, IBM, Intel, Kerry Group, Marks & Spencer and Yamanouchi.

So what do these firms offer that make them so desirable? Lots of money, excitement and glamour? Not necessarily.

In the main, they deliver career and personal development opportunities. They have a clear sense of direction, recognise the merits of a positive work-life balance, offer the chance to go overseas, and invest in keeping staff happy.

Karen Forte, chief information officer for Allianz in Ireland, says: "It is the combination of professional opportunities and personal support that makes Allianz an appealing place to work." Forte, who runs a team of 60 people, says: "I have been given a lot of freedom and autonomy to develop my area with good support from senior management."

On the personal side, the company pays more than lip service to the concept of the work-life balance. The firm pays transport and childcare subsidies and covers parental leave.

Employees at all levels have the option of working from home, job-sharing, working flexible hours or just doing a four-day week. It also offer supports such as counselling.

Hiring the best people and giving them a good level of autonomy is policy at CRH, the building materials group. The firm then keeps an eye on its staff with a view to helping them to develop. "We pay better than average but not over the top," says Jack Golden, director of human resources. "We are constantly reviewing our people, looking at succession planning and at how best to develop talent."

Many opportunities arise overseas. CRH has 50,000 staff in 22 countries. Only 11% of the company's Euro 11 billion turnover is accounted for by its Irish operations. Kerry Group employs 17,500 people and has operations in 15 countries.

Its rapid growth in recent years has created good international opportunities. "We are perceived as an ambitious organisation with clear goals which we're good at achieving," says Frank Hayes, director of corporate affairs. "Anyone with potential can move upwards regardless of their original discipline."

One of Kerry's young high-flyers is Bill Sheridan, who has worked with the food group in America, Spain, South America and China. Sheridan, who has a degree in international marketing with Spanish, joined as a management trainee in 1992.

Since then, his assignments have ranged from evaluating new markets to assessing potential acquisitions to working on a start-up operation in Mexico. "Individuals are well known to the senior team and you know they are monitoring how you're doing," he says.

"When I approached the company for time out to do an MBA, they were very favourably disposed."

It wasn't the salary that made the difference. "It was a company I wanted to go back to. You get paid well, but not excessively. That said, I don't think Kerry has ever lost anyone because of salary," he says.

Money is not an issue for Susan Geraty either. She is more interested in meeting new challenges. Geraty joined Yamanouchi, the Japanese pharmaceuticals company, in 1988 and is now director of plant operations. "When I expressed the desire to have new challenges I was listened to," she says. "Moving into what were, for me, new areas has ensured I have ongoing challenges."

Geraty says it is an organisation without a lot of conflict. "There is a culture of co-operation here," she says. The style of management at Intel is what impresses Deirdre Ryan, an automation group leader, who won an Intel scholarship at college. While it didn't have any strings attached, she was more than happy to apply for a job. "I like the style of management," she says. "You get clear and precise feedback about how you're doing. There are career paths in place and if you show commitment and dedication, you will be encouraged."

The promise of a clear career path attracted Sinead Cox to Marks & Spencer. To the young graduate with her heart set on working in fashion retailing the graduate training programme looked good. "Marks & Spencer allows you to plan your career development according to your needs," she says. "If you feel you need to improve in a certain area you will be helped to do this.

"We have three-monthly reviews, which is good for keeping you focused." Cox started off in general management but has moved into buying following a year training in London.

Research is the key tool in your kit

Companies are spoilt for choice when it comes to ways of gleaning market information, writes Kathy Foley

IT'S a typical Tuesday evening in the Murphy household. Mum and eldest daughter Mary are curled up on the couch watching Coronation Street. Dad is sitting in his armchair reading the paper and sneaking the occasional peek at the soap's goings-on. Younger sons Michael and Martin are playing with their train set on the floor. And the ethnographic market researcher is perched on the other armchair taking copious notes.

Ethnographic, or observational, research is the latest trend in market research, a service used by companies to find out more about the demographics of their customer base and when, why and how those customers buy and use the firm's products or services.

"Companies do market research to improve or amend existing products and services, to find out what customers think of them, to develop new product lines, and to generate and test new ideas," says Philly Desai, the spokesman for the Market Research Society and managing director of Turnstone Research.

"It also allows firms to look at the effectiveness of marketing and advertising.

If the company has developed a new campaign, maybe new leaflets, it can find out whether it is effective in terms of brand recognition, communicating the message and so on," says Desai.

The global market for market research in 2002 was E17.6billion, according to Esomar, the world association of opinion and marketing research professionals. In Ireland, certain sectors tend to conduct or commission research regularly.

The key sectors are fast-moving consumer goods, including such companies as Cadburys, Mars and Glanbia, banks, financial and insurance companies, telecommunications firms, government and semi-state bodies, according to Richard Waring, the director of Lansdowne Market Research.

As useful as market research can be, companies should always have a reason to do it. "Research is fine but there is no point in doing it just for the sake of it," says Peter Dolan, the marketing manager of Woodie's DIY.

A firm needs to work out what decisions it needs to make before doing research.

Does it want to launch a new product or open a new store? The answers to such questions should influence the decision on whether or not to do research and the type to go for.

"There are two different sorts of research. An ad-hoc piece of research is designed to examine one particular issue at a certain point in time, for example if a company is launching a product and needs to test it or wants to find out how a brand is performing," says Waring.

"Tracking research continually measures the performance of the company. Most of the large multinationals have continuous research into customer satisfaction or advertising tracking," he says.

Market research can be further broken down into quantitative and qualitative research. "Quantitative is best for answering how many. Qualitative is best for answering why and how," says Waring.

Quantitative or numerical research is designed to produce and measure data and statistics and enable a company to easily compare results over a period of time or between different groups of people. It usually consists of polling a large number of people by telephone, post, face-to-face or online.

Qualitative research, on the other hand, is more concerned with people's attitudes and perceptions and is used when deeper insights into customer behaviour are needed. This type of research is generally carried out in small focus groups or in individual interviews.

Woodie's DIY is among many Irish companies that regularly makes use of focus groups for market research purposes, particularly six months or so after it opens a new store.

"When we have been trading for a while in an area, we undertake focus groups there. We get people's opinions and views once we are established in the area. We find out what they think of us and how we fare visavis competitors," says Dolan.

"They can be very valuable and you get a lot of off-the-cuff remarks that you do not get in a basic survey... they helped us turn the emphasis towards the ladies.

DIY stores were seen as 'hard' and not places women were visiting on weekends, so we turned them more into shops. A lot of that information came out of the focus groups," he says.

Although useful, focus groups can have a downside, says Dolan. "You get the odd occasion when one person will hog it. They can influence the group and drive the findings ... someone from Woodie's is always in attendance so we know what happened on the night."

In addition to this qualitative research, Woodie's also commissions an annual quantitative study, consisting of door-to-door research on the Woodie's brand image.

Some companies need to carry out more regular market research than others, according to Desai. "In markets that move very quickly, such as pop music, film and any youth trends, companies would do research every couple of months.

"If a company were tracking brand awareness or its general corporate image, it would not want to do that every three months unless it had been through a huge crisis. Some do statistical monitoring too regularly and then find that nothing changes from quarter to quarter."

The downside of market research, especially for small-and medium-sized firms, is that it is extremely expensive. "Most clients tend to be larger companies with bigger budgets. They can allocate some of their resources to research. Very few of our projects would cost hundreds of euros; it would generally cost thousands or tens of thousands. For a smaller company, E5,000 or E10,000 is a lot of money but it would be a small task for us," says Waring.

In addition, certain types of research are more expensive than others.

Observational research is more expensive than focus groups, which in turn are more expensive to run than a simple poll.

"The point is what you get out of it. You can work out which type is cheapest but it is not necessarily going to be the most cost-effective," says Desai, who adds that research can save firms money on development costs by enabling them to find out, ahead of time, if there is a market for a planned product or service.

Waring also cautions against trying to cut costs where research is concerned. "You have got to be aware of the pitfalls. If you are buying inexpensive rough-and-ready research, remember that bad information can be far more dangerous than no information."

It is also critical that those surveyed or interviewed are representative of the target market as a whole.

Companies that decide to commission market research should draw up a shortlist of firms and then submit a detailed brief to those on the list, requesting a fully costed proposal from each of them.

Once the study is done, the research company should provide the client with a substantial report complete with recommendations.

For companies that cannot afford professional market research, Waring recommends desk research as a good starting point. The Central Statistics Office website (www.cso.ie) has plenty of freely available research as do many government and industry bodies.

Businesses can also design a simple questionnaire requesting basic information from its customers, finding out how much they know about the company and how they think its products or services can be improved.

"Research does not have to have an enormous sample or be hugely expensive. You just accept the fact that it might not be as robust and will just give you an indication. It's a balance between how much money you have and the level of accuracy you want," says Waring.

Dolan believes that knowing your own business is just as important as market research. "When you are close to your business, you know what is going on and get a lot of information from managers and customers," he says.

"We are a very tightly run organisation. Head office is not hidden away. We are constantly out in our stores, not desk people. I'm out there at weekends, meeting customers and watching the service. There is a lot to be learnt on the floor."

Desai agrees: "A lot of companies feel they have masses of data but not much insight. Sometimes, all that data can take away from the reality of the human consumer and companies want to get back into close contact with their clients.

"Market research is one way of gaining views on what is going on but, within a complex organisation, there is a wide range of other information sources available such as the sales team or the customer-service department.

"Good knowledge management can bring together all those sources of information and make sense of them."

Smart ways to net new custom

Companies must think hard to avoid throwing good money after bad campaigns, says Ruth O'Callaghan.

THREE years ago, Mary and Dan Morrissey, who run Al-Uisce, a small building firm in Wexford, set up a website, which included pictures of houses they were building and related information. It was so successful that one sale came from a customer in Kansas - not a bad feat for such a small Irish company.

Depending on what sort of business a company does, marketing, advertising and image can be hugely important. Although manufacturing companies can survive by spending as little as 1% of their annual budget on image, companies in the service industry may need to spend 10%. The important thing is to be focused before you spend.

The Morrisseys paid Euro 2,000 to have their site redesigned by Speed IT, a Wexford company. Canyon Communications, a London hosting company, will set the site up on the internet and connect it, using keywords, to search engines so browsers looking for houses in Ireland will be directed to it.

To save money on the site, Mary Morrissey wrote all the content herself, took photos and designed graphics. She even did a voice-over about the company that will be played when users access the site.

For the same money, the Morrisseys spent on their new website, you could get about four advertising spots on the Ian Dempsey Breakfast show on Today FM, 60 spots on a regional radio station, a half-page ad in a regional newspaper, a week's advertising space on 16,000 takeaway paper cups in cafes around Dublin, or ads in 12 regional cinemas for a week.

All of this could be very beneficial to your company, and boost customer awareness and sales - if it's done properly.

In the past two years, small and medium-sized Irish companies have lost money, employees and clients because of the economic downturn. Many are reporting order books down a frightening 41%, especially in export markets.

As a way of dealing with this stagnation, some companies have been tempted to spend money improving, or revamping, their image. Be careful, experts warn, you could be wasting your time and money.

Denis Brennan, a marketing consultant who advises manufacturers and retailers, said: "People clutch at straws. A company thinks, business is tough. Let's do a bit of marketing. Let's bang in an ad or do a bit of PR. They believe these strategies are going to increase sales. It might help them sleep at night, but generally, it's a useless approach."

Unless the campaign is well thought out, it's probably going to be a waste of money, Brennan said. For example, if you're going to rent a stand at a trade exhibition, visit the show first and publicise the fact you're going to be there. Equally, make sure your target customers are the ones reading your ad in a newspaper.

What executives need to do first, when sales are stagnant or falling, is work out what they are doing and what they want to achieve in writing.

Irish small and medium-size enterprise (SME) owner/managers are typically hardworking, but tend to come out in a rash at the idea of writing reports, or putting strategies down on paper. Often, they indulge in what Brennan calls "pub talk", discussing projects but not dissecting them on paper.

"You need to write things down. If you don't write it down, you're not really thinking it out. It is like doing your taxes. But a lot of good, and bad, ideas come to the surface."

Instead of going ahead and paying a consultant, the exercise of putting things on paper means the company is in control of any marketing strategy. Reacting to this strategy doesn't have to mean starting an ad campaign. It can mean making a phone call or writing a short letter to customers.

Yvonne Boyle, an SME marketing consultant, said: "Before you throw money at things, analyse where the business is now. Before you bring in extra resources, have a basic idea of your problems and targets."

Recently, Boyle says she was approached by a company that had "gone in at the deep end".

It had spent a lot of money on an ad campaign which was having no result. Boyle put together a media plan and showed what sort of publications were most suitable, and most profitable, for the company to place ads in.

Sounds simple? Another company, with falling sales, approached Boyle for a marketing strategy. She sat down with the company and wrote out an analysis of where it was making sales, where it was losing, and where the potential growth areas were, so it had a list of existing and potential clients to target individually.

Many companies can't compete on price any more because of labour costs, but they have a reputation for quality and service, which they should capitalise on, experts believe.

Jim Curran, Irish Small and Medium Enterprises association's head of research, said: "It is difficult to compete on cost, but SMEs generally more than make up on provision of services. That's what gives them the edge. If an owner-manager takes a few minutes out of every day to phone existing customers, he or she can easily find out how the company is performing. Your most important asset is reputation. You're constantly banking goodwill with customers."

A clear, simple website might be the best way to start, if you don't already have one. It lists your company details, clients get instant information, and you can be connected to search engines related to your area of expertise.

Mary Morrissey said: "IT is here to stay. It won't ever replace word of mouth, but it does back it up. People from Dublin communicate with us by e-mail. You can print them out, and it means you rarely make a mistake."

If you have a website, put testimonials from customers on it for potential clients to read, Jim Curran advised. "A good website can give the impression that you're a lot bigger than you are. When you're providing good services, word of mouth will get you as much as advertising. Three or four testimonials are as good, if not better, than spending thousands advertising in the regional press."

WHAT IT COSTS

* Website: the basic, almost essential, marketing tool for an SME. Design, hosting, upkeep and troubleshooting of a good, informative site can cost Euro 2,000 or Euro 3,000 for a basic site, or between Euro 10,000 and Euro 15,000 for a top-of-the-range site.

* Direct mailshot: can be especially useful for a once-off effort, such as launching a new product. About 1,000 customers could receive a personalised message, or a small brochure, for about Euro 3,500, including consultant's fee.

* Exhibition stand: renting a stand can cost as little as Euro 700. Designing and manning it for anything up to a week, particularly outside Ireland, could cost as much as Euro 10,000.

* Advertising: remember - be creative. Know your target market. It costs about Euro 11,000 for a half-page black and white ad in a national newspaper (Euro 2,000 or Euro 3,000 for a regional paper).

* Employing a consultant: the price depends entirely on the size of your company and what needs to be done. A one-day meeting with a consultant to discuss possible strategies could cost as little as Euro 400.

Tax breaks bring investors and growth

Companies refused bank loans can gain funding through a business expansion scheme, writes Ruth O'Callaghan

WHEN Jack Cleary died suddenly in 1995, his children threw themselves into running the family company, Glenisk, which makes organic dairy produce. Three years later, it was turning over Euro 2m and employed 15 people. The family decided it was time to expand. They had two choices: go to the bank or look for investors to fund the company. The bank was not keen to provide the money. Even though Glenisk was growing by 45% a year, it didn't have enough collateral for a loan.

The company's accountants suggested trying a business expansion scheme (BES).

Glenisk decided to go ahead, and hired a broker who managed the scheme and offered it to private investors.

Investor interest was immediate. Within three months of hearing about the scheme, Glenisk had a cheque for Euro 250,000, to invest in the company's growth for five years, after which it would be withdrawn by the investors, along with a percentage, venture capital-style.

"We weren't a nuts-and-bolts factory or a household brand, but investors could see us on supermarket shelves," says Vincent Cleary, joint managing director. Getting the cash injection has freed up Glenisk's internal funding and increased innovation. The product development section is working at increased pace.

"This money has had a domino effect on the growth of the company," Cleary says.

The BES was set up in 1984 as a tax break for individual investors. Anyone who put up to Euro 31,750 a year into a growing company through a BES got a 42% tax break on their investment. The last fund closes this year on December 31, but there are still opportunities for companies to seek investment.

Several large accountancy firms have set up BES funds. Since the scheme opened, Grant Thornton, an international accounting firm with offices in Dublin and Limerick, has invested in more than 50 companies from its Limerick office alone.

It favours projects that invest in property. Under the BES, investment is limited to certain manufacturing, services, tourism, research and development, plant cultivation, factory construction and leasing and some new music recording projects.

BES Management Ltd, a joint fund run by BDO Simpson Xavier and Davy Stockbrokers, has invested Euro 60m in schemes since 1995, supporting such companies as Boru vodka and Wrights of Howth, as well as Glenisk.

Using a broker means, apart from having someone else deal with the paperwork, the company gets ongoing financial advice. Grant Thornton doesn't appoint anyone to a company's board, but it usually becomes the company's auditor and handles the exit of investors after the five-year period.

It is "always conscious" of how a company is performing, says John Hinchey, BES adviser and director of taxation at Grant Thornton.

BES Management says it can visit a company up to 12 times a year, depending on how it is developing, sitting in on board meetings and suggesting strategies and alliances.

"Mostly, (visits are undertaken) three or four times a year," says Steven McGivern, BDO partner and director of BES Management.

The advantages of using a broker are obvious, but there are aspects that companies may find difficult. When the five years are up, brokers will take up to a 30% bonus for their investors. BES Management is "aggressive on exit caps" for its investors, McGivern says.

Faced with an investor representative on the board, smaller companies may find it hard to take their advice. Vincent Cleary of Glenisk says his BES investors take an interest in what the company does, but "as long as we are performing in a reasonable manner, they tend to leave us to ourselves".

This is just as well as, Cleary says, family-run businesses "don't take too much advice".

There is an alternative to hiring a broker. Some companies prefer to set up their own scheme, known as a private placing. This means canvassing family and friends to raise the money, doing the paperwork and, if necessary, hiring an accountant to deal with the final application to the Revenue Commissioners.

In 2000, Eamon O Doherty raised Euro 250,000 on a BES scheme for Ossidian, an e-learning software company. "There is a control issue," O Doherty says. A lot of companies will find it hard to give back the money invested as hard cash after five years, he says. To return a Euro 750,000 BES investment, a company would need to have at least Euro 800,000 available in cash. O Doherty's investors are all in for the long term, he says, and they get yearly tax relief. If the company is sold or floated on the stock exchange, they could reap benefits.

"It's not a savings scheme for investors. You're investing for the long haul, for shares, and to get tax relief," O Doherty says.

A broker will give persuasive reasons why a company should use its funds instead of setting up alone. The signature of a well-respected firm at the bottom of a company's documentation works wonders in comforting would-be shareholders.

Hinchey says: "It's reassuring for investors. It can be difficult to persuade them to invest if they don't see the backing of a financial institution. Investors will always want some level of comfort."

Also, brokers will reject any schemes that don't look like succeeding, so it's a sign of the strength of a company's proposal if it is taken up. "We have people coming to us with a proposal and we say we don't think it is viable. You're going to get an honest appraisal of your project," says Hinchey.

Companies should not misunderstand what a private placing means, according to O Doherty. Legally, a company that is deciding to raise its own BES finance can't just ask the public to invest, it must ask friends and family who are willing to leave the money in the company as long as it needs it. It is important, brokers say, that investment clients aim first to get their money back, with extra profits as a bonus.

BES Management's first fund started in 1995 and exited in 2000. Investors got a 100% return, as well as their 42% tax break. The 1996 fund, which exited last year, returned 95% to investors. The firm is working on the exit of its third fund and raised Euro 7.15m for this year's BES investments.

BDO's McGivern says the investment should be regarded in the main as tax relief as the performance of a company can fall as well as rise. "Tax relief is a big part of it. The first objective is to get the money out there and then get it back."

Investors in BES Management can spread their risk, McGivern says, because the fund usually mixes about 10 companies.

There is one final reason why using a broker can be preferable to finding your own backers, says Vincent Cleary. "If something goes wrong, it is easier to go to faceless investors and tell them, than going to friends."

Get ready to venture forth

Companies looking to expand should think about equity capital before they even need it, writes Sandra O'Connell

AFTER a mere three years in business, Sean Fitzgerald's Sentenial employs 12 staff and is set to double the number within six months.

The payment-technology specialist firm spotted a global niche for a direct debit product and has already attracted clients in Ireland, Australia and America. "We made a product the market wanted and, because we got cash-flow pretty quickly, we were able to reinvest to grow the business," he said.

Fitzgerald set up Sentenial with savings of E100,000. He went on to win funding from Enterprise Ireland. The next stage will require "serious money" from venture capitalists. "My next round will require E2m to E3m," he said. "After that, it will be in multiples of E10m."

Companies that enjoy rapid growth are prime venture capitalist (VC) targets, according to Diane Mulcahy, a former venture capitalist and author of Venturing Forward -A Practical Guide to Raising Equity Capital in Ireland.

Equity investors, particularly VCs, want "rapidly growing companies, led by strong management teams, with the potential to capture significant market share in large and emerging markets, before realising a timely and profitable exit," she writes.

The best time to raise capital is before you need it, says Mulcahy. "It is a lengthy process to identify and interest investors, schedule meetings and other presentations, conduct due diligence, negotiate and close the transaction and receive the money," she said.

It pays to prepare early. Investors are rarely in a rush to complete a deal "and their patience affords them negotiating leverage if the company is in desperate circumstances and requires an urgent injection of capital".

Fitzgerald is ahead of the game in this aspect too. "You need to be looking two funding stages ahead every time," said Fitzgerald. "You need to think in terms of stages. So you don't end up giving all your equity away too soon. But you also need smart money, someone who will bring you added value such as market share."

To secure it, the business must first be attractive to prospective suitors. "Build your credibility first. The key is having proof of concept, bringing good clients with you," said Fitzgerald. "Then you have value when you go to the market."

Don't be greedy either. "Don't look for too much. It can make you lazy," said Fitzgerald. "(If you) get E10m when you need only E2m, you end up going out to dinner. When building a business, you need to be disciplined."

Finally, as any Jane Austen heroine might put it, save yourself until you have found the right match.

"When it comes to equity just don't give away too much too soon," said Fitzgerald.

To get the best valuation for your business, know your sector, know your figures, develop a valuation range and then build your case, said Mulcahy.

Attributes likely to result in a higher valuation include a strong and experienced management team and the existence of other investors who are interested in the deal.

Being in a "hot" sector or market helps, as well as being in strong flotation or trade-sale markets with high valuations, having paying customers and a strong sales pipeline and intellectual property ownership.

Those prepared to take that step must first be "investor ready". "Investors have a habit of evaluating the structure and governance of potential investments and classifying them as either 'clean' or 'hairy'," says Mulcahy.

With clean deals, the financials are up to date, employment, share options and shareholder agreements are signed and organised, and intellectual property ownership is documented. Tax and corporate filings are up to date and in order.

Hairy deals arise where "poor record-keeping and documentation make the company's capital structure or financials opaque" or the "board is composed of inappropriate, unsophisticated or poorly performing directors that must be restructured," she says.

A business angel is a better option for many small firms than getting involved with VCs too soon, according to Fergal McCann, lead adviser at InterTrade Ireland, a business development body, promoting north-south trade.

"It is very difficult for most companies in Ireland to scale up in size to suit venture capitalists, who are typically looking for rapid growth," said McCann "The business angel network is more likely to be applicable to most Irish companies seeking equity investment," he said.

Last year the Business Angel Partnership was launched, bringing together the private investor networks of Enterprise Ireland, the Dublin Business Innovation Centre and InterTrade Ireland to form a national business angel network with particular interest in start-up and early stage small firms.

InterTrade Ireland's Equity Network provides an advisory service to help small firms understand the benefits of private equity and ensure they are investor-ready.

That is the stage at which Diarmuid Crowley and John O'Keefe find themselves. The pair founded Wild Orchard Natural Beverages in April 2001, having spent the previous six months perfecting recipes for their fresh-fruit smoothies and juices in Crowley's kitchen.

Having succeeded in tickling the taste buds of family and friends, they amassed E110,000 in savings and bank loans and went into commercial production at their factory in Hospital, Co Limerick.

Today the company, which employs nine people, sells in excess of 20,000 bottles a week across Ireland and moved into profit last year.

Having cracked the domestic market, the next stage in the plan is to take on Britain and Northern Europe.

Such a move would require significant investment, however. So far their strategy of ploughing all earnings back into the business has been enough to allow them to develop. "The kind of money we needed to keep moving was never massive," said Crowley. "But to ramp up to the next stage requires us to expand the factory and invest in automation. It's a big step and we have to revisit our funding strategy."

They may finally be ready to relinquish a portion of their firm. "While we're still very small to be giving away equity, we can see the advantages of having a smaller piece of a bigger pie," said Crowley.

"We can also see the advantage of having an investor who brings not just money to the table but who adds value, whether in terms of knowledge of new markets, distribution networks or products."

Equity capital comes without the burden and cash-flow drain of the monthly repayments required by debt, according to Mulcahy.

"External investors can bring a new and higher level of financial discipline, as well as greater requirements for good governance," she said. "An equity investment can meaningfully improve the reputation and status of a company. The downside is a big one: a reduction of control and decision-making over your business."

HELP DESKS

THE Business Expansion Scheme (BES) allows start-ups to obtain up to E1m of equity capital from a BES fund or BES investors.

BES investors can receive up to E31,750 in annual tax relief for their participation in BES and could invest directly in the company or via a BES designated fund, holding on for a minimum of five years to get full tax relief.

For more details see Revenue.ie.

The government's Seed Capital Scheme allows entrepreneurs who invest their own capital in a qualifying firm in which they are a full-time employee to claim back their own previously paid income tax for the past six years, up to the amount they have invested in their company. Details are on Revenue.ie.

County and City Enterprise Boards focus on very early-stage companies with less than 10 employees, with equity financing typically offered for redeemable preference shares, which are more like loans. See Enterpriseboards.ie for more.

Enterprise Ireland makes equity investments but demands that its investment is matched or exceeded by private equity investors. For information see Enterprise-ireland.com.

Business Angels Partnership is at businessangels.ie and the Equity Network can be contacted via IntertradeIreland.com.

Venturing Forward is published by Oak Tree Press. Visit Dianemulcahy.com or Oaktreepress.com for further information.

Stiffer penalties for late payers

COMPANIES that fail to pay their suppliers on time will face stiffer penalties if a European commission investigation next year concludes current charges are inadequate, writes Ruth O'Callaghan.

Irish business groups are complaining that not only is the present legislation inadequate, it is a total failure. Under laws in force since August last year, companies in Ireland are allowed to charge a penalty interest rate of 0.02% a day on bills unpaid after 30 days.

However, lobby groups contend that most small businesses are being forced to sign separate payment contracts, particularly with large customers. These set longer payment deadlines, effectively rendering the regulations redundant.

third of businesses surveyed in July by the Irish Small and Medium Enterprise Association (ISME) said payments were actually taking longer to come in than before the legislation was introduced. Only one in eight said they were being paid within 30 days.

"It has patently failed to deliver for the vast majority of small businesses," said Jim Curran, ISME's head of research.

Research by the European commission shows that one in four insolvencies is caused by late payment, resulting in the loss of 450,000 jobs every year across member states.

Winners promote and reward innovation

Companies that recognise hard work and ideas among their staff reap benefits in the loyalty stakes, writes Olive Keogh.

SWEATING assets is the corporate equivalent of a good work out. It drives executives to think slim and get the best possible return from every facet of their business. Those who trim and tone successfully are well rewarded.

Performance-related pay has become a familiar concept. Many executives have grown used to having everything they do linked to results. How well they make the connection is there for all to see. Its champions believe it is an effective motivator because it brings good financial rewards and recognises achievement. It can also help companies to recruit and retain high-performing managers.

However, its critics question its short-term focus and the extent to which money is truly a prime motivator. For many people job satisfaction is still the most important factor. They also say it is not conducive to team spirit and that assessments of what constitutes "performance" can be quite subjective.

Paying people for achieving performance-related targets certainly works where the objectives are narrow. For example, where a business is working flat out to maximise the return on an established product or service. But it doesn't leave much room for anybody to think about what comes next.

Now, more than ever, companies need to innovate to stay ahead. But performance and innovation have different lead times and goals that do not necessarily sit easily together. Given today's competitive pressures, many organisations feel uncomfortable about investing resources in uncertain outcomes.

Having a workforce that delivers sterling day-to-day performance and comes up with new ideas is obviously the ideal. But achieving this balance may require a rethink in how a company's financial incentives are structured. A performance pay driven environment may not be the best option for a company that needs to promote innovation. Fostering a culture that promotes and rewards innovation is a start.

But companies may still find it difficult to motivate people at two such different levels.

The international management consultancy group, McKinsey, produced a study last year on this issue.

Their study looked at the determinants of corporate adaptiveness in companies such as GE, Hewlett-Packard, Nokia and 3M. All of these organisations have a track record in sustaining one business while developing others.

One of the report's key findings was that a business culture which places the primary emphasis on performance-related pay may inhibit innovation.

"Pay for performance may still have an important job to do in such a culture, but as a supplemental boost rather than a primary driving force," the report says.

Organisations that are most successful at getting people to handle their "day" jobs while still finding time to develop new ideas tend to place less emphasis on pay for performance. "Crucially, they combine it with an unusually inclusive culture," say the authors. In such companies, employees are made to feel that their interests and those of the business are much the same. As a result, they give of their best to ensure both its current and long-term success.

Companies tend to put managing current objectives and developing new ideas into separate boxes. They are rarely run side-by-side. Most motivational awards and incentive schemes for employees tend to be biased towards performance, and it's not difficult to understand why.

Measuring current performance is a lot easier than measuring something that may have a positive impact on the business at some time in the future.

It's typically the technology sector where getting the edge matters most. It is hardly surprising then that the leaders in innovation reward tend to be large IT multinationals.

For the purposes of this article, we asked more than 12 Irish companies for details of how they fostered and rewarded smart ideas. Most had no answer to the question.

One organisation that has a carefully structured rewards and recognition system is Intel. Bright ideas, good service, and innovations that make a significant contribution to the business are all rewarded.

The first rung on the recognition ladder is a "thank you" gift voucher which an employee gets for putting an exceptional amount of effort into something. At the next level are Intel Ireland site awards. These are presented quarterly to an individual or group from any department who made an innovative contribution.

The third tier is divisional awards, where a team in an international division is recognised for making an outstanding contribution.

The Intel "Oscar" is an achievement award. It recognises a contribution that has significantly improved corporate operations or competitiveness. Winners get an all expenses paid trip to America (with their partner) to attend an Intel banquet and a gift of Intel shares.

Waterford Wedgwood rewards people who come up with ideas for cost and energy savings. The top award is Euro 3,000, and awards are given in varying amounts and in varying numbers from year to year.

The Kerry Group, which has been successful at maintaining current performance while expanding into new business areas, operates reward schemes in different divisions within its international operation.

"We don't currently have one in Ireland, but there are such schemes in other business units," said Frank Hayes, the director of corporate affairs.

"The rewards are typically related to business and, while they have a value, it may not necessarily be a financial one."

Feargal Quinn, Superquinn chairman, is a man brimming with bright ideas. He rewards innovation within his own organisation at an annual awards ceremony.

Employees who come up with good ideas also receive a financial reward ranging from Euro 300 to Euro 3,000.

Hewlett-Packard (HP) is the second largest IT company in Ireland employing over 4,000 people in Dublin, Leixlip, Galway and Belfast.

"Our biggest and most valuable asset is our staff, and we ask them to communicate their ideas for product innovation, process improvement or new business development," said Martin Murphy, country manager for Ireland.

HP employs 1,700 at its inkjet manufacturing facility in Leixlip. Roughly 100 people are recognised there every month for making an ideas contribution. Rewards are tracked and reviewed quarterly by the senior management team. Lower level rewards across the company include lunch vouchers valued at up to Euro 200.

HP also has a more substantial recognition programme for employees who create intellectual property. In addition to its formal rewards and recognition policy, the company recognises site and departmental achievements from time to time with social events and gifts.

Cash in on longer life expectancy

Companies that target our ageing population can expect to profit and could prove healthy investments, writes Margaret E Ward

ADVANCES in medical science and improved nutrition mean people are living longer.

Many pensioners are very active and have more money to spend on their interests.

Those who suffer from ill health have an increasing number of medical devices and procedures, such as angioplasty, to prolong their life. Drugs for high blood pressure, osteoporosis, heart conditions or arthritis are staples in many older people's medicine cabinets.

Companies that produce goods and services catering to the "grey market" stand to benefit from changing demographics. In Ireland, there are more than 1m people over the age of 50. Life expectancy is 75 years for a man and more than 80 years for a woman. The number of pensioners, as a percentage of population is also increasing.

People are more physically able than ever before. Some older people are working well past retirement age, so their disposable income is greater than that of past generations.

Investors who identify companies or funds targeting the needs of the growing mature market may find their shares offer the prospect of long-term, above average returns.

Many of the businesses that have identified this new interest group are international companies. In America and Britain, business leaders and politicians treat pensioners with respect, as they form powerful, highly organised lobby groups.

The majority of Irish businesses have failed to identify this as a target market, says Michael O'Halloran of Irish Senior Citizens Parliament. "Older people have money and time on their hands and there is no question that there is a growing market for services that cater to them."

The main concerns for elderly people include health, travel and entertainment.

Irish equity analysts interviewed by The Sunday Times believe many sectors stand to benefit from those who live longer: pharmaceuticals, medical devices, gardening, DIY, leisure, travel, wealth management and nutritional foods and drinks were all cited.

Pharmaceuticals and medical devices Reliance on drugs is a fact of life for many older people, but fewer Irish people use them when compared to their European counterparts. "In tables comparing spends on drugs, Ireland is at the bottom, so there is great room for growth," says Des Flood, head of equities at Hibernian Investment Managers.

United Drug, which on Friday was trading at Euro 14.50, was a favourite choice of analysts who believe Irish people will spend more on drugs as they get older.

Despite this, United is trading at a high price and, if purchased, should be held for at least two years.

Overseas, Pfizer ($33) is a good option according to Pramit Ghose of Bloxham Stockbrokers, which holds the stock in its Intrinsic Value fund. The company manufactures Viagra, a treatment for erectile dysfunction that can be common in older men, and Lipitor, a cholesterol-lowering drug, a good fit for the grey market. It is also noted for excellent management and a strong product pipeline.

Schering-Plough ($19), in the Contrarian Fund, is in a turnaround situation, with cheap valuations.

The risks are increasing in this sector, however, as it has become much harder to win approval for new products. In the US, for example, there are strong lobby groups pushing for lower medicine prices and many drug companies have been losing vital patent rulings to generic competitors. General Motors ($25.40) is a leading lobbyist in this area, due to the size of its health bill.

Billy Hanley, a fund manager with Dolmen Butler Briscoe, believes medical device companies are more likely to benefit from money spent by ageing patients than drug firms.

DCC (Euro 11.60), which has a medical devices business, may find that sales improve as the population becomes older. Smith & Nephew (Pounds 37.57), the British firm which specialises in orthopedic replacement products, such as hip and elbow joints, is also a possibility.

DIY and gardening Spiralling property prices mean that many older people cannot afford to move and must make repairs on their living spaces, says Flood. This means that gardening and DIY centres such as Woodies DIY, which is owned by Grafton Group (Euro 3.86) and B&Q, which is owned by Kingfisher (Pounds 2.80), in Britain, may benefit from extra business.

Travel and leisure Jurys Doyle hotels (Euro 8.20) and Ryanair (Euro 5.58), both held in Bloxham's Contrarian Fund, may also see a bounce from the actively retired, as many elderly people are on a budget but have plenty of time to spare. Ghose also likes them because they look cheap following share price declines.

Mid-week or low-season deals targeting this age group can help to improve occupancy and load rates. Accor (Euro 32.81), a dominant hotel operator in Europe, is doing well in the bargain hotel market thanks to an excellent website, says Ghose.

Carnival Cruise Lines (Pounds 18), the largest cruise operator in the world, carries more than 2m passengers a year. With fears of terrorist attacks on cruise ships, the company's share price has fallen to almost half of its value two years ago. It is best to employ a buy-and-hold strategy until tourism recovers.

Wealth management The stereotype of pensioners living out their days on government handouts is no longer the reality for an increasing number of people.

The push towards private pension provision means that many people have accumulated wealth during their working life and now have the time to enjoy it or pass it on to their children.

Wealth management and inheritance planning businesses aimed at high net-worth investors should find business doing well. Investment in one of the main Irish banks or UBS (SFr74), the biggest private bank in the world and a huge asset manager, is one way to capitalise on this portion of the grey market.

"The likelihood of baby boomers running out of money is small," says Kevin Walsh, portfolio specialist with Bank of Ireland Asset Management.

"However, property values remain a concern, as many have money tied up in their principal private residence and holiday homes. It's a big part of their asset base and, if everyone starts to sell and or look to cash, it will be a scary time."

Food and drink As people get older their nutritional requirements change, and companies that offer healthy products targeted at that market are hoping to cash in on increased awareness. Nutritional drinks by companies such as Danone (Euro 119) could do well.

On the convenience side, one of Bank of Ireland's larger holdings is Sysco ($30.70), the American food and food services company. More food dollars are being spent outside the home and Sysco, which supplies food service products such as plastic cutlery to restaurants and pubs, is an obvious example. A recent addition was the Outback Steakhouse mid-market dinner restaurant chain.

Portfolio planning Grey shares should be part of a diversified portfolio. Investors can largely expect the share price to increase even if they do not pay good dividends. Shares should be held for at least two years.

Targeting the grey market also has a downside. Many retirees have a "waste not, want not" attitude and are very price sensitive, so if something is not perceived as good value they won't buy it.

Also, many pensioners rely on a fixed income, so inflation can cause them to tighten their belts faster than other groups. Companies that rely solely on the grey market are probably not good investments, but those that target some of their products at this emerging market should benefit over the longer term.

Bosses seek tax break to match staff

COMPANY directors are pressing for tax reform, claiming that its costs them an extra E3,000 a year to take home the same pay as their employees.

In a submission to Brian Cowen, the finance minister, company bosses claim the tax system discriminates unfairly against them. Those owning more than 15% of the shares in their companies are liable for PAYE, but cannot claim the special tax credit available to other PAYE workers. This is worth E1,760 a year.

"A person who quits a job and sets up a company is out of pocket to the tune of E1,760 each year," the submission states. "A director needs to earn approximately E3,000 in additional income to achieve the same take-home pay as any other employee." The submission was prepared by the Institute of Directors in Ireland and the Institute of Chartered Accountants in Ireland.

They claim that directors are treated unfairly if they miss the filing deadlines for tax returns. This results in an automatic 10% surcharge on all taxes, including those that directors have paid on time through the PAYE system.

"No other worker is surcharged on their employment income under the same circumstances," according to the submission. It argues that, unlike other taxpayers, directors are unfairly charged PRSI on non-employment income such as rent from property. If a teacher and a director both earn E30,000 a year in rent, the director pays PRSI but the teacher does not.

"The very fact of being a proprietary director costs that director E1,500 more per annum," according to the submission. It argues that directors are automatically branded as fat cats, even when their businesses are small.

"Many of the highest-earning individuals in Ireland are not proprietary directors," it states. "This submission is aimed at alleviating tax discrimination faced by, for example, the owner-director of an engineering firm in Mayo or a manufacturing business in Carlow, people who work at the coal face of Irish business."

Meanwhile, in its budget submission Ibec, the employers' lobby group, has called for improved capital allowances for companies that purchase energy-efficient vehicles, the abolishment of 1% stamp duty on share transactions, and the halving of the 25% tax rate on dividends received from the foreign subsidiaries of Irish companies.

Waste law slip costs a packet

COMPANIES that sell goods with packaging attached are obliged by law to take responsibility for its disposal. Failure to do so could result in prosecution and a hefty fine, writes Olive Keogh.

The ramifications of the Waste Management (Packaging) Regulations 2003 are not confined to large organisations. All firms with a turnover in excess of E1m which put 25 (or more) tons of packaging into circulation in a year are responsible for what happens to it.

Failure to comply leaves companies open to prosecution. In 2002, 15 firms were successfully prosecuted for non-compliance. Enforcement of waste management legislation is being stepped up. The Department of the Environment recently allocated E7m for this purpose. Companies may get a visit from an inspector to verify their compliance. It is up to the operator to prove that it is not covered by the regulations.

There are two ways of complying with the rules. The first is by joining a compliance collective such as the government-licensed Repak scheme. The second is to opt for self-compliance.

Repak was set up in 1997. It has about 1,500 members countrywide. Members pay an annual fee based on the type and quantity of packaging produced in the previous calendar year.

Companies that join Repak are deemed to have met their legal obligations under the waste management regulations. Repak uses membership fees to fund recycling initiatives and to subsidise the collection of packaging material for recycling.

Those opting for self-compliance register with their local authority and pay an annual fee per business address. They must register all their business premises with the authority, supply quarterly statistics detailing the sort of packaging they handle and must accept packaging back from customers and the public.

A formal packaging audit will accurately establish how much of the material your company produces in a year. If you think you may be borderline in relation to the 25-ton threshold, weigh the packaging of your firm's largest selling product line and multiply it by the number of units produced in a year.

The regulations governing waste packaging disposal were reviewed and amended in March. The turnover threshold for companies covered by the regulations was reduced from E1.27m to E1m. The weight threshold (25 tons) remains the same but all packaging supplied to consumers in association with goods sold or consumed now counts towards this figure. This means that sectors not previously obligated under the regulations are now included, such as pubs, clubs, hotels and restaurants.

As of March businesses must also segregate specified packaging materials contained in their "back-door" waste. These specified materials (glass, aluminium, steel, paper, fibreboard, wood and plastic sheeting) are banned from landfill sites and must be separated at source and sent for recovery or returned to the supplier.

Don't fall victim to cunning ploys

Companies must be vigilant against fraud - keeping a particular eye on employees, warns Sandra O'Connell

PAT McDONAGH is familiar with the ways a business can be defrauded. The boss of Supermac's, the fast food chain he established in 1979 and which now has 85 outlets, famously captured CCTV images of a customer deliberately splashing water on the washroom floor of one of his restaurants in order to slip and sue for personal injuries.

At a time when small firms were crippled by rocketing insurance rates, it made him an overnight hero to owner-managers everywhere.

Now chairman of Chambers' Ireland's Retail Crime Council, McDonagh is more alert than ever to the ways of fraudsters. Unfortunately for employers, more often than not the deceiver is likely to be one of their own staff. "Research suggests that about 10% of any business's staff is on the fiddle, one way or another," said McDonagh. "Unfortunately, it is part and parcel of being in business."

Every firm has to have its own way of detecting and dealing with fraud, he says.

"In our case, it's all about keeping tight control of stocks," he said. "We have a policy of weekly stock checks and we keep a very close eye on cash register overrings that don't add up, to see if a pattern emerges. Our systems are such that, where a discrepancy does occur, we can narrow it down to the very hour it happened."

According to research carried out by the Small Firms Association (SFA), 69% of small businesses have been victims of fraud in the past two years, with an average cost per company of E5,400. Of those cases, 85% were perpetrated by staff. Despite this, it found that nine out of 10 small firms have no fraud prevention measures in place.

"Internal fraud is a significant problem, but very few businesses even recognise that problem exists - and then only when it's too late," said Avine McNally, the assistant director of the SFA.

"Small businesses tend to be reactive rather than proactive in dealing with it, and only one in 10 companies have taken fraud-prevention measures and risk audits in the past year. Yet small companies that do not have the necessary internal controls in place are seen as being 'open season' for fraudsters."

There are various steps a business can take to minimise their risk of exposure.

"Firms should always ensure that authorisation requirements are in place for important business processes that involve cash payments and collections," she said. "This includes, for example, orders to suppliers and invoices to be paid.

Any bank operation must be authorised by an appointed signatory."

An effective system of management control needs to be established to monitor the work of employees in addition to the financial performance of the company.

Managers should learn to recognise and identify warning signals and take appropriate preventive action.

"These signals may include irregularities such as increases in the amount of raw materials used relative to output, increases in inventory, increased breakages or unnecessary increases in the number of suppliers that a firm uses," she said. "Be alert too in cases of missing or altered documentation."

Regardless of the nature of fraud, its final outcome will always be financial loss. According to McNally, there can be significant non-financial effects too.

"Fraud can damage trust between the business and its stakeholders, customers or suppliers, which affects the firm's reputation. This could lead to loss of revenue," she said.

Fraud can have a demoralising effect on employees and create an atmosphere of distrust, which inevitably affects performance and customer service.

"White-collar fraud is prevalent in small business and is hidden by nature. It must be treated as an everyday risk because firms that do not take preventive steps are exposing their business to serious losses," she said.

According to the accountancy firm KPMG Forensic, the amount of illegitimate expenditure in an average organisation could be as high as 5% of the total.

Implementing a thorough fraud reduction programme can reduce that by half, giving firms a potential saving of 2.5% of total costs annually.

One of the most effective ways to reduce the incidence of internal fraud is through more rigorous vetting procedures at the recruitment stage.

"Always follow up on an

applicant's references," said Andrew Brown, a director of KPMG Forensic.

"The problem with a tight labour market is that owners are so delighted to find anybody that they don't do enough background checks.

"This is important because increasingly we are hearing anecdotal evidence of criminal gangs putting people into companies specifically to find out how their systems work."

The rise in contracts-based positions can make employers particularly vulnerable.

"Unfortunately, employers simply do not run the same checks for contract staff as they do for full-time staff," said Brown.

"And yet the risks are

enormous. For instance, most employers would know where their company cheque books are at any given time, but few might know precisely who has access to their electronic payments link to the bank."

Equally, outsourcing certain functions can increase the risk of fraud. "If you are working with somebody on an outsourced basis or you are employing people through recruitment agencies, check the contract so that you are clear about where the risk lies, should fraud occur," he said. "People often think the agency will compensate them if somebody they supply does something criminal, but you might find by reading the small print that they don't."

Purchasing arrangements are a notoriously weak link in a company's defences.

"Be vigilant about ensuring you are getting the best price for everything you buy.

Put in place good tendering procedures so that you always get two or three quotes for each transaction. Moreover, ensure that you split functions so that no one person is responsible for ordering, receiving and paying for goods," said Brown.

Businesses must also have clear fraud prevention and detection policies in place.

"Small firms are particularly vulnerable here. Very often personnel are so taken aback when they discover something untoward going on that it can take them longer to take action, increasing the damage done. Nominate one person to take responsibility for fraud and prepare a policy so that they know precisely how to proceed when it occurs," said Brown.

Good personnel management is important too. In Brown's experience, by far the most common perpetrator of internal fraud is a staff member who is experiencing financial troubles, with the cost of divorce and gambling problems among the main causes.

"In cases where you suspect somebody is in difficulties, step in and ask if there is anything you can do to help. Such actions on the part of management build loyalty and improve morale," said Brown.

"This type of intervention can make all the difference because it helps build staff loyalty.

"Poor staff morale is in itself an important indicator of fraud because, where it exists, people who see an opportunity for fraud can more easily convince themselves that what they are doing is not unreasonable.